Thinking of retiring and selling your business, maybe you want a change of direction, whatever your reason, there is no shortage of advice and online content about how to successfully sell and exit your business.
Given the abundance of experience and proven information available in the market, how do so many business owners still get it wrong? Probably the most common and biggest mistake any seller can make is marketing apathy. For example, underestimating the business sale process and failure to confidentially market the business early or for an appropriate period of time to help build and engage a range of potential buyers. If you do not do this, you run the risk of creating a ‘one horse race’ with a single buyer, a situation which must be avoided at all costs.
As a business owner, you should be aware that many active acquirers feed off this lack of seller preparation and marketing commitment. Enter the ‘Off Market’ bargain hunters, typically acquisition brokers, investors and others looking for easy business deals and promising quick and hassle-free transactions. Over the last 12 months the majority of business owners will have received a letter or two from a potential acquirer showing interest in their business. Do not be flattered, unless you already know and respect the acquirer; you must assume this letter is a standard template and has been sent to many.
The fact is, the acquirer is doing the hard work, investing time and money to find you, they do this to avoid buyer competition which can only push up the eventual sale price. In return for their efforts finding you, they are likely to expect a highly leveraged, low money down deal. You will have little room for negotiation and if their deal does not work for you, they will quickly drop you and move on to the next target. A buyer’s decision is always 100% commercial, your decision will inevitably include an element of emotion and the buyer will play on this.
Beware of these unsolicited acquisition letters, do your research and do not believe any easy claims of a quick sale, easy transaction, or best price as this it is likely to prove just wishful thinking. The undisputed fact is that without some form of competitive tension between multiple buyers, you will simply hand full control of the deal negotiation to the acquirer.
Also, do not fall for the claim that ‘you save on the broker fee’. We all know the idioms, ‘there is no such thing as a free lunch’ and ‘he who pays the piper calls the tune’, the reality is what you might save in broker fees, you are likely to lose many times over by not creating competitive tension and selling for far less than you could have done otherwise.
If you have simply had enough and just want out of your business and you do not care about the sale price or terms, this may be the option for you. If however, you want to exit with the comfort of knowing you did your homework and secured the right deal for you and your staff, the ‘one horse race’ option is not for you.
If you are thinking of selling or are considering an approach from an acquirer, you have nothing to lose and much to gain by talking to an experienced ‘business sale adviser’, even if you do not plan to engage a professional.
Most of us will be happy to talk to you in confidence at no cost or obligation for the first session. You will only sell your business once, take your time, prepare and do it right!